In November 2015, one of the funds, the Crystal Wealth Enlightened Factoring Fund, gave a $10-million advance to a prospective gold mining company that represented roughly 50% of its overall portfolio. The money was due to be repaid in November 2016, but the mine investment defaulted.
Rather than recognizing the loss, the Factoring Fund extended the term of the mine investment by one year. It was supposed to be insured by an $18-million performance bond whose effectivity period was from November 2016 to November 2021, which had Crystal Wealth as the named beneficiary.
However, the insurance was cancelled on November 28, 2016, which Housego did not know until afterward.
Because he knew about the mine investment’s roughly 50% weighted in the Factoring Fund’s portfolio, the fact that it had already defaulted once, and that the insurance was cancelled, the BCSC said Housego should have known it was high risk. Still, he placed at least 260 of his clients in the fund, representing collective investments of at least $985,000.
In another violation, Housego admitted that starting on August 12, 2016, he invested approximately $4.25 million from the Factoring Fund and another fund, the Crystal Wealth Enlightened Hedge Fund, in gold subscription agreements with a prospective mining company.